Do most Lenders frown upon...

9 Replies

a buyer, getting a Loan for the sole purpose of purchasing a property in order to turn right around and Flip it, in 3 - 4 months ( after the minimum 90-days has passed ) ?

If I'm looking to get into the Flipping business and Flip a property every 3-4 months, do most banks/lenders discourage this, since their main way of making a profit on a loan, is the interest they collect from that loan

Just trying to make sure I stay in the good graces of these Lenders, as I'll be relying on them to get new loans per property I look to buy

Thanks everyone

From a stand-point of financing, what you will be doing is very similar to a builder who builds spec homes.  Develop a relationship with a good local bank and see what they can do for you.

What kind of lender is this? There are some lenders that specialize in these types of things.

Generally speaking, yes. However, some banks, particularly smaller local banks, may have a loan program that may work for you. I like to know about as many banks in my area (as well as the types of deals they "like") so that I know who to talk to when I need money. Short term financing is tough using a mortgage.  Another thought is to set up a line of credit, secured or unsecured or both, as it is more flexible. Be careful on what you tell your banker you intend to use it for, many don't like to hear that you are using it to BUY real estate

You should be able to get a loan if you have 15% to 20% down and good credit.

Joe Gore

If you're using conventional or other long term loans for fix and flipping, yes, you will pretty quickly burn the bridge to get those loans.  What you really want is some sort of construction financing.  Seems like a few banks are doing those loans now, so make a lot of calls and see if you can find one in your area.

@Jon Holdman why would doing what OP described "burn bridges"?

Banks specifically put prepayment penalties in the loan agreement to act as a premium guarding against this very scenario. They won't "take it personally" they'll take the extra money and close the file.

If OP wants to avoid a prepayment penalty, he could negotiate a short term loan and pay a couple extra points.

Now clearly, if OP is disingenuous, and takes out a 30-year mortgage with the intention of using it for house flipping, then yes, it may be a problem.

But I don't see any potential pitfalls if he uses a normal secured business loan. Granted, he's going to need some assets/ collateral to borrow against.

Lenders that frown upon it will have a prepayment penalty.

If the loan is a conventional mortgage it will not have prepayment penalties, @Patrick M.   Those loans aren't expected to be paid off quickly.  I was assuming @Michael Dunn  was talking about conventional mortgages.  Hence my suggestion to look into some sort of construction financing.

If the property is in bad shape, you will have a harder time getting a mortgage on it in the first place; it may not pass the bank's inspection or you'll have to put a huge percentage down. You may want to look into a small business (personally guaranteed) loan.

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